10 of the top US stocks to buy in 2020

US stocks to buy in 2020

Below is a list of ten US stocks that brokers believe are currently undervalued by the market:

^{Source: Reuters}

How to take a position on US stocks

Singapore-based clients can take a position on US stocks in two ways – by investing or by trading derivatives.

If you want to buy and own the stocks, you can open an IG share trading account and buy stocks via our share trading service. You will need the full value of the stock upfront, and you can only profit if the share price goes up. If you own stock, you could receive dividend payments (if the company pays them) and have voting rights.

If you don’t want to own the stock, or if you want to speculate on upward or downward price movements, you can do so via CFD trading. With CFDs, you don’t need the full value of the stock upfront, because you’ll trade using leverage. And, because you don’t own the stock, you can go long or short.

It only takes a few minutes to create your account and you can top up your trading funds using a credit card or debit card, or via bank transfer.

If you would rather take some time to practise your trades without risking real money, you can open a demo account, which gives you S$200,000 in virtual funds.

Amazon (AMZN)

Amazon’s meteoric growth shows no signs of abating this year. The company’s ecommerce operations continue to go from strength-to-strength, the number of Prime subscribers continues to increase and Amazon’s own products – spanning from smart speakers to tablets – are still flying off the shelves. More importantly, the firm’s cloud computing division, which generates the majority of profits, remains the global market leader. The opportunity for more growth seems limitless: whether that is through video streaming, broadcasting live sports, or through its entry into areas like groceries and pharmacies. The one sticking point remains the lack of dividends. It continues to reinvest sums into its growth and payouts are not on the horizon, which means investors will have to continue to rely on appreciation in the share price.

Brokers are extremely bullish on Amazon’s prospects and the average target price suggests there is 14% potential upside for investors that buy now.

Where is the Amazon share price headed in 2020?

Amazon: what to expect from 2019 and 2020 results

Amazon’s financial year runs until the end of December and will publish its annual 2019 results in the coming months. Below is what analysts expect for the results and how they compare to 2018:

• Revenue: US$279.11 billion (+19.8%)
• Earnings before interest, tax, depreciation and amortisation (EBITDA): US$41.61 billion (+24.3%)
• Pre-tax profit: US$12.45 billion (+10.6%)
• Dividend per share: US$0 (flat)

And this is what analysts expect Amazon to deliver in the 2020 financial year and how it compares to the forecasts set for the 2019 results:

• Revenue: US$330.91 billion (+18.6%)
• EBITDA: US$49.66 billion (+19.3%)
• Pre-tax profit: US$16.52 billion (32.6%)
• Dividend per share: US$0 (flat)

Coca-Cola (KO)

Coca-Cola is the undisputed leader of soft drinks with over 500 beverage brands being sold in over 200 countries. The company is building a global ‘total beverage company’ with market leading brands in sparkling soft drinks, juices and dairy drinks, water and sports drinks, tea and coffee, and it is the second biggest energy drinks maker. The drinks maker has successfully reinvigorated its core soft drinks – such as releasing new Coke flavours (partly spurred on by a crackdown on sugar content in some countries like the UK) – and has acquired new revenue streams that can accelerate growth going forward, such as the purchase of Costa Coffee from Whitbread. Acquisitions are bolstering the business, but organic growth remains strong while margins and returns have also steadily increased over the past three years. That is partly thanks to a US$3.8 billion annual cost-saving programme that is drawing to a close.

Coca-Cola boasts a Buy rating from brokers, which believe there is potential 7% upside to the current share price.

The history of Coca-Cola

Coca-Cola: what to expect from 2019 and 2020 results

Coca-Cola’s financial year runs until the end of December and will publish its annual 2019 results in the coming months. Below is what analysts expect and how they compare to 2018:

• Revenue: US$37.06 billion (+16.4%)
• EBITDA: US$11.73 billion (+7.7%)
• Pre-tax profit: US$11.24 billion (+2.2%)
• Dividend per share: US$1.61 (+3.2%)

And this is what analysts expect Coca-Cola to deliver in the 2020 financial year and how it compares to the forecasts set for 2019:

• Revenue: US$38.62 billion (+4.2%)
• EBITDA: US$12.65 billion (+8%)
• Pre-tax profit: US$12.07 billion (+7.3%)
• Dividend per share: US$1.69 (+5%)

Constellation Brands (STZ)

Constellation Brands produces over 100 different beers, wines and spirits, with brands including Corona beer under its belt. The company has adjusted its portfolio of drinks to focus on a smaller group of higher-margin, higher-growth lines. However, the company has attracted some investors following its huge entry into the legalised cannabis market in the hope of becoming a global leader in cannabis-based beverages. The firm has invested almost US$4 billion into Canadian cannabis firm Canopy Growth, which it says is poised and ready to enter the US market once (or if) marijuana is legalised at a federal level. Analysts expect its results for the 2020 financial year to be worse than the previous year, but the dividend is safe, and it is expected to largely recover in the 2021 financial year.

Brokers have a Buy rating on Constellation Brands and the average target price suggests there is potential 16% upside to the current share price.

Constellation Brands: what to expect from 2020 and 2021 results

Constellation Brands runs a financial year to the end of February. Below is what analysts expect from the 2020 results and how they compare to the previous year:

• Revenue: US$8.23 billion (+1.4%)
• EBITDA: US$2.96 billion (-3.9%)
• Pre-tax profit: US$2.09 billion (-6.8%)
• Dividend per share: US$2.98 (+0.7%)

And this is what analysts expect for the year to the end of February 2021 and how they compare to the forecasts for the 2020 financial year:

• Revenue: US$7.96 billion (-3.6%)
• EBITDA: US$3.00 billion (+1.6%)
• Pre-tax profit: US$2.20 billion (+5.3%)
• Dividend per share: US$3.10 (+4%)

Disney (DIS)

Disney needs no introduction, but the company has spent big to completely transform itself in recent years. Whether it’s the acquisition of 21st Century Fox, taking full control of the popular Hulu streaming service, or buying the rights to Star Wars, Disney is now one of the most attractive media and entertainment firms on offer. This has all set the company up for its latest venture – its new video streaming service Disney+. With such powerful brands, including the Marvel superheroes franchise, the Pixar animation studios and sports broadcaster ESPN, many hope Disney has what it takes to finally dent Netflix’s dominance in the space. This transformation has not been cheap, and analysts expect earnings to take a hit in 2020 even if revenue is expected to soar – but Disney looks like a great long-term bet for investors, and it pays dividends too.

Brokers have a Buy rating on Disney and the average target price implies investors could reap the reward of 8% upside to the current share price.

Will Netflix, Amazon, Disney or Apple come out on top?

Disney: what to expect from 2020 results

Disney’s financial year runs to the end of September. Below is what analysts expect from the 2020 financial year and how it compares to the year to the end of September 2019:

• Revenue: US$81.4 billion (+17%)
• EBITDA: US$17.93 billion (-5.7%)
• Pre-tax profit: US$12.83 billion (-0.6%)
• Dividend per share: US$1.86 (+5.7%)

Facebook (FB)

Last year was a test for Facebook, and one that it largely passed. Whether it was the Cambridge Analytica scandal, criticism over the use of customer data, or questions over how it manages content and influences major events like elections, it is safe to say that Facebook remains under the spotlight of regulators. And yet, user numbers have been unaffected, and the company’s finances have continued to go from strength to strength. Facebook has numerous growth avenues to pursue, like via Instagram or WhatsApp, or through more adventurous ventures like its new Portal devices or its cryptocurrency project – although monetising these areas will not be easy. Analysts expect Facebook to deliver strong top-line growth and for profit to jump in 2020, although it isn’t expected to pay dividends anytime soon.

There are not many stocks that brokers are more bullish on than Facebook and the average target price suggests there could be up to 10% upside for investors that buy at the current share price.

How to buy and sell Facebook shares

Facebook: what to expect from 2019 and 2020 results

Facebook’s financial year is in line with the calendar year. Below is what analysts expect from the 2019 results and how they compare to the previous year:

• Revenue: US$70.48 billion (+26%)
• EBITDA: US$39.51 billion (+18%)
• Pre-tax profit: US$24.76 billion (-2.4%)
• Dividend per share: US$0 (flat)

And this is what analysts expect for 2020 and how they compare to the forecasts for 2019:

• Revenue: US$85.83 billion (+22%)
• EBITDA: US$44.74 billion (+13%)
• Pre-tax profit: US$32.05 billion (+29%)
• Dividend per share: US$0 (flat)

Fiserv (FISV)

Fiserv offers payment and processing services to a wide array of clients and helps them collate data on their own customers. The fintech firm is active in over 100 countries and aides everyone from small business owners to banks and credit unions. This year will be a landmark one for Fiserv following the completion of its takeover of rival First Data in the middle of last year. The US$39 billion all-stock deal was finalised in late July, which means its results have been significantly boosted in the second half of 2019 and positions it well to grow further in 2020.

Brokers have a Buy rating on Fiserv and believe there is potential 8% upside to the current share price.

Fiserv: what to expect from 2019 and 2020 results

Fiserv’s financial year runs until the end of December. Below is what analysts expect from the 2019 annual results and how they compare to the year before:

• Revenue: US$14.53 billion (+149%)
• EBITDA: US$5.70 billion (+159%)
• Pre-tax profit: US$3.31 billion (+105%)
• Dividend per share: US$0 (flat)

And this is what analysts expect for 2020 and how they compare to the 2019 forecasts:

• Revenue: US$15.47 billion (+6.4%)
• EBITDA: US$6.15 billion (+7.9%)
• Pre-tax profit: US$4.16 billion (+26%)
• Dividend per share: US$0 (flat)

General Motors (GM)

General Motors is one of the riskiest choices on the list. The entire car industry is struggling with the transition to electric and autonomous cars, and new cash-rich competition from firms like Uber, Alphabet’s Waymo and Tesla. For General Motors, sales in the US seem to have peaked and it is yet to prove it can fully capitalise on the growing opportunity in China. Plus, it has also been hit by strikes which has forced it to improve pay at a time when it is trying to cut costs from the business. Analysts are expecting a notable drop in revenue and profits when it releases its 2019 results but believe the company’s ongoing restructuring puts it in a better position in the longer-term, with the company forecast to bounce-back strongly in 2020.

Brokers believe the uncertainty surrounding General Motors has significantly weighed on shares, with the average target price suggesting there is up to 37% potential upside from the current share price.

General Motors: what to expect from 2019 and 2020 results

General Motors has a financial year that runs in line with the calendar year. Below is what analysts expect from the 2019 results and how they compare to the previous year:

• Revenue: US$137.34 billion (-6.7%)
• EBITDA: US$13.15 billion (+0.4%)
• Pre-tax profit: US$7.22 billion (-36%)
• Dividend per share: US$1.53 (+0.7%)

And this is what is expected for 2020 and how it compares to the 2019 forecasts:

• Revenue: US$145.69 billion (+6.1%)
• EBITDA: US$16.04 billion (+22%)
• Pre-tax profit: US$10.32 billion (+43%)
• Dividend per share: US$1.53 (flat)

Newmont (NEM)

Newmont is primarily known as a gold miner, but the company produces a wide-array of metals including copper, silver, zinc and lead from operations spanning the American continent, Australia and Africa. Its portfolio means it is a diversified commodity company that can reap the reward of generally higher commodity prices (gold is currently trading at its highest level since 2013, for example). Newmont has been focused on reducing the costs of production, which helps it benefit even more from higher prices. Gold is currently trading at well over US$1,500 per ounce and the fundamentals for the metal remain strong considering the political uncertainty around the world and fears that a recession could be around the corner. With that in mind, Newmont’s current target to get the all-in cost of production to around US$925 per ounce means the firm is in a highly profitable position, which analysts expect to feed through to both its 2019 and 2020 results.

Brokers have a Buy rating on Newmont and the average target price suggests there could be up to 14% potential upside from the current share price.

How to trade gold

Newmont: what to expect from 2019 and 2020 results

Newmont’s financial year runs until the end of December. Here is what analysts expect from the 2019 results and how they compare to the previous year:

• Revenue: US$9.75 billion (+34%)
• EBITDA: US$3.73 billion (+44%)
• Pre-tax profit: US$1.99 billion (+71%)
• Dividend per share: US$0.56 (flat)

And this is what they expect for 2020 and how they compare to the 2019 forecasts:

• Revenue: US$11.19 billion (+14.8%)
• EBITDA: US$4.93 billion (+32%)
• Pre-tax profit: US$2.57 billion (+29%)
• Dividend per share: US$0.64 (+14.3%)

Nike (NKE)

Nike continues to be at the forefront of the increasingly attractive space of athleisure clothing and footwear. The company’s revenue has increased 9% in the first half (H1) of its current financial year and profit jumped 24%. Although analysts expect a weaker H2 performance, this sets Nike up to deliver a solid financial year in 2020. The improved results have been partly accredited to its investment in selling more goods directly to consumers online. Nike has said growth is ‘paramount’ to the company going forward and it is expected to deliver strong dividend growth this year – which should run alongside further repurchases of stock.

Brokers have a Buy rating on Nike and the average target price suggests there is up to 8% potential upside for investors to capitalise on.

Nike: what to expect from 2020 results

Nike’s financial year runs until the end of May. Below is what analysts expect from the 2020 financial year and how they compare to the last financial year:

• Revenue: US$42.4 billion (+8.4%)
• EBITDA: US$6.24 billion (+13.9%)
• Pre-tax profit: US$5.53 billion (+15.4%)
• Dividend per share: US$0.94 (+9.3%)

T-Mobile (TMUS)

The outlook for T-Mobile looks solid, even though this year will significant for the business. The third-largest telecoms company in the US is currently hoping to merge with the fourth biggest, Sprint, but the deal is currently being threatened by regulators. Still, analysts are extremely bullish on T-Mobile and believe there is considerable upside for the stock regardless whether it completes the merger or not. This means a successful merger could transform the business and propel it to new heights and that shares have room to grow even if it fails, suggesting T-Mobile is a safe bet for 2020. The company added seven million new customers in 2019, representing its sixth consecutive year of growth. It also has the long-term prospects that spawn from the roll-out of 5G and faster broadband.

Brokers believe there is up to 14% potential upside to the current T-Mobile share price, giving it a Buy rating.

T-Mobile: what to expect from 2019 and 2020 results

T-Mobile’s financial year runs in line with the calendar year. Below is what analysts expect from the 2019 results and how they compare to the previous year:

• Revenue: US$44.95 billion (+3.8%)
• EBITDA: US$13.23 billion (+6.8%)
• Pre-tax profit: US$4.62 billion (+18%)
• Dividend per share: US$0 (flat)

And this is what they expect from 2020 and how they compare to the forecasts for 2019:

• Revenue: US$47.31 billion (+5.3%)
• EBITDA: US$13.96 billion (+5.6%)
• Pre-tax profit: US$5.58 billion (+21%)
• Dividend per share: US$0.23 (from $0)